Zahawi played active role in offshore-linked lender

27 January 2023

Zahawi played active role in offshore-linked lender

UK Conservative chairman did not disclose involvement with company led by Matt Hancock’s brother 

Nadhim Zahawi is more closely connected to an offshore company at the centre of a tax row than he has publicly admitted, new evidence suggests.

The Conservative minister registered an internet domain name for Crowd2Fund Limited after Gibraltar-based Balshore Investments began building up a stake in the peer-to-peer lending start-up in 2014. 

Zahawi has denied deriving any benefit from Balshore, which is controlled by his parents. But records show that he played an active role in the business it co-owned, registering at least another dozen domain names and continuing to own one of them until after he was made a minister. 

This week the prime minister, Rishi Sunak, ordered an ethics inquiry into Zahawi’s reported payment of £4.8 million in outstanding tax and penalties after authorities took issue with Balshore’s holding in YouGov, the polling company Zahawi co-founded. 

Zahawi’s activities for Crowd2Fund, which do not appear on the MPs’ register of interests, will raise further questions over whether he personally profited through links to the Gibraltar company. 

“This new information demonstrates that there’s been a total lack of transparency on Zahawi’s part about his true involvement with this organisation,” said Sir Alistair Graham, former chairman of the Committee on Standards in Public Life.

Zahawi did not respond to requests for comment.

Government rules require that ministers “scrupulously avoid” any actual or perceived overlap of their personal and political affairs. Zahawi’s links to Crowd2Fund may risk breaching the ministerial code, said Fleur Anderson, the shadow paymaster general.

“There are questions not just about his complex web of financial affairs but about his ministerial declarations and potential conflicts of interest,” she said.

Government Programme

Founded by Chris Hancock, the brother of Zahawi’s political ally Matt Hancock, Crowd2Fund has benefited from political decisions. It was one of ten companies selected for a Treasury and Department of International Trade programme to help financial technology businesses trade in Australia. 

Crowd2Fund raises money from consumers to lend to businesses through an online exchange. In 2016, Crowd2Fund began selling “Innovative Finance ISAs” following the government’s decision to allow peer-to-peer lenders to offer the tax-free savings product. 

Chris Hancock, who did not reply to our questions, told The Guardian in early 2017 that Zahawi wasn’t involved “hands on” in the company. But at that time Zahawi was the owner of several active Crowd2Fund domains, according to historical registers. 

In an potentially unlawful omission, Crowd2Fund did not name its controlling owner for a number of years. Last June, Zahawi’s parents appeared in corporate filings as its “persons of significant control” a few weeks before Zahawi left his post as education secretary to become chancellor of the exchequer. They control 37 per cent of Crowd2Fund through Balshore, its largest shareholder.  

Zahawi, who had already advocated for the wider peer-to-peer lending industry as an MP, used his brief tenure as chancellor last summer to introduce legislation heralding further deregulation of the already lightly policed sector. 

Unlike traditional ISAs (Individual Savings Accounts), crowdfunding investments are not protected if things go wrong. An industry executive said that the reform, which would remove the need for companies to issue a prospectus for issuing shares worth more than €8 million, would “enable businesses to raise as much as they wish through regulated equity crowdfunding platforms”. 

Zahawi called the introduction of the bill a “landmark day for financial services in the UK”.

Headline picture: Simon Dawson, No. 10 Downing Street